Industrial Security and Intelligence India P Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2547/CHNY/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8759 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2002-2003
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Business expenditure
• Section: 43B; 143(3); 148; 37; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . , . . , ! '# [BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO.2547/MDS/2014 / ASSESSMENT YEAR : 2002-03 M/S INDUSTRIAL SECURITY AND INTELLIGENCE INDIA P. LTD 139, OLD NO.59A, FIRST FLOOR RANGARAJAPURAM HIGH ROAD KODAMBAKKAM CHENNAI 600 024 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE II(3) CHENNAI [PAN AAACI 4760 J] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI N. MADHAVAN, JCIT / DATE OF HEARING : 27-01-2015 / DATE OF PRONOUNCEMENT : 04-02-2015 ( / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 200 2-03, IS DIRECTED AGAINST ORDER OF THE COMMISSIONER OF INC OME-TAX (APPEALS)- II CHENNAI DATED 16.7.2014, PASSED IN APPEAL NO.89 0/2013-14, AFFIRMING SECTION 43B DISALLOWANCE OF ` 19,27,306/-, IN PROCEEDINGS I.T.A.NO.2547/14 :- 2 -: UNDER SECTION 143(3) R.W.S 147 OF THE INCOME-TAX AC T, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE IS A SECURITY SERVICES PROVIDER. IT HAD FILED ITS RETURN ON 28.10.2002 ADMITTING INCOME OF ` 8,55,310/-. THE SAME WAS SUMMARILY PROCESSED. THEREAFTER, THE ASSESSI NG OFFICER FORMED REASONS TO BELIEVE THAT THE ASSESSEES INCOME LIAB LE TO BE TAXED HAD ESCAPED ASSESSMENT. THIS MADE HIM TO REOPEN THE AF ORESAID PROCESSING. A SECTION 148 NOTICE DATED 1.2.2008 ST OOD ISSUED. IN CONSEQUENTIAL PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEES EMPLOYEES CONTRIBUTION TOWARDS PROVIDEN T FUND AND ESI OF ` 14,19,736/- AND ` 3,07,570/- RESPECTIVELY TOTALLING ` 19,27,306/- HAD BEEN REMITTED AFTER DUE DATES OF THE SAID FUNDS BUT WITHIN THE RELEVANT FINANCIAL YEAR ITSELF. HE OBSERVED IN RE-ASSESSMEN T FRAMED ON 4.12.2008 THAT THE SAME INVITES DISALLOWANCE U/S 4 3B R.W.S 36(1)(VA) AND 2(24)(X) OF THE ACT. ACCORDINGLY, THE IMPUGNED DISALLOWANCE/ ADDITION STOOD MADE. 3. THE ASSESSEE PREFERRED AN APPEAL. IT CHALLENGED VALIDITY OF THE IMPUGNED REOPENING AND THE IMPUGNED DISALLOWAN CE/ADDITION WAS I.T.A.NO.2547/14 :- 3 -: SOUGHT TO BE DELETED ON MERITS. THE CIT(A) HAS REJ ECTED BOTH THESE PLEAS. THE LOWER APPELLATE ORDER ON MERITS READS AS UNDER: 4.2. DISALLOWANCE OF EMPLOYEES' CONTRIBUTIONS OF PF AND ESI PAYMENTS : THE NEXT ISSUE IS REGARDING THE DISALLOWANCE OF EMPLOYEE'S CONTRIBUTION OF PF & ESI. THE ASSESSING OFFICER IN HIS ORDER OBSERVED THAT THE ASSESSEE HAS NOT PAID THE EMPLOYEE'S CONTRIBUTION OF PF & ESI WITHIN THE DUE DATES SPECIFIED UNDER THE RESPECTIVE ACTS AND HENCE DISALLOWED THE SAME U/S.36(I)(VA). THE AMOUNT S OF EMPLOYEE'S CONTRIBUTION OF PF & ESI SO DISALLOWED B Y THE ASSESSING OFFICER IN A.Y.2002-03 ARE RS.16,19,736/- AND RS.3,07 ,570/-, RESPECTIVELY. THE RELEVANT PORTION OF THE ORDER IS AS UNDER: IN COURSE OF THE HEARING, THE AR OF THE ASSESSEE ST ATED THAT THE EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI WAS P AID WITHIN THE YEAR AND THE PROVISIONS OF SEC. 43B WOUL D NOT BE ATTRACTED. IT WAS ALSO STATED THAT THE SAME SHOULD BE TREATED AS BUSINESS EXPENSES U/S 37 OF THE INCOME-TAX ACT, 1961. THE SUBMISSIONS OF THE ASSESSEE ARE DULY CONSIDERED AND CANNOT BE ACCEPTED DUE TO THE FOLLOWING REASONS :- (I) AS PER THE-PRO VISIONS OF SEC 2(24)(X) OF THE INCOME- TAX ACT 1961, INCOME INCLUDES 'ANY SUM RECEIVED BY THE ASSESSES FROM HIS EMPLOYEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ANY FU ND SET UP UNDER THE PROVISIONS OF THE EMPLOYEES' STATE INSURANCE ACT 1948 (34 OF 1948), OR ANY OTHER FUND FOR THE WELFARE OF SUCH EMPLOYEES (II) AS PER THE PROVISIONS OF SEC36(1)(VA), DEDUCTI ONS ON ACCOUNT OF ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH THE PROVISIONS OF SUB - CLAUSE (X) OF CLAUSE (24) OF SEC 2 APPLY, IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE. EXPLANATION ;- FOR THE PURPOSES OF THIS CLAUSE, 'DUE DATE' MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEV ANT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISS UED I.T.A.NO.2547/14 :- 4 -: THEREUNDER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. IN OTHER WORDS, ASSESSEE IS ELIGIBLE FOR DEDUCTION OF THE SUM RECEIVED BY THE ASSESSEE FROM ITS EMPLOYEES AND THE SAID SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEES' ACCOUNT IN THE RELEVANT FUNDS ON OR BEFORE THE DUE DATE OF THAT FUND. IN THE INSTANT CASE, THE ASSESSEE HAS RE CEIVED THE SUM FROM ITS EMPLOYEES BUT HAS NOT CREDITED THE SA ID AMOUNTS IN THE EMPLOYEES ACCOUNT OF THE RELEVANT FU NDS ON OR BEFORE DUE DATES OF THOSE FUNDS. AS THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 36(1)(VA) OF THE INCOME TAX ACT, 1961, BY WAY OF NOT DEPOSITI NG THE EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI SO COLLE CTED BY THE ASSESSEE, IN THE RELEVANT FUNDS WITHIN THE DUE DATES OF THAT FUNDS, THE FOLLOWING AMOUNTS ARE TREATED AS IN COME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SEC.2(24)(X) OF THE INCOME TAX ACT, 1961 AND ADDED TO THE RETURNED INCO ME OF THE ASSESSEE: A) EMPLOYEES CONTRIBUTION TOWARDS PF: 16,19,736 B) EMPLOYEES CONTRIBUTION TOWARDS ESI: 3,07,570 19,27,306 ADDITION: RS.19,27,306/- 4.2.1 NORMALLY THERE ARE TWO TYPES OF PF & ESI CONT RIBUTIONS, I.E. (I) EMPLOYER'S CONTRIBUTION OF PF & ESI AND (II) EM PLOYEE'S CONTRIBUTION OF PF & ESI. AS FAR AS THE EMPLOYER'S CONTRIBUTIONS OF PF & ESI ARE CONCERNED, THE SAME ARE GOVERNED BY TH E PROVISIONS OF SEC.43B OF THE ACT. IF THE AMOUNTS AR E PAID ON OR BEFORE THE DUE DATE TO FILE THE RETURN OF INCOME TH E SAME BECOMES ELIGIBLE FOR DEDUCTION. HOWEVER THIS IS NOT THE ISS UE HERE IN THE PRESENT CASE. 4.2.2 THE DISPUTE IN THE PRESENT APPEALS IS RELATIN G TO THE PAYMENTS OF EMPLOYEE'S CONTRIBUTION OF PF & ESI. AS FAR AS THE EMPLOYEE'S CONTRIBUTIONS OF PF & ESI ARE CONCERNED THE SAME ARE GOVERNED BY THE PROVISIONS OF SEC.36(1)(VA) OF THE ACT AND ARE NOT SUBJECTED TO THE PROVISIONS OF SEC.43B OF THE A CT. THESE AMOUNTS ARE TO BE PAID WITHIN THE DUE DATES SPECIFI ED IN THE RESPECTIVE (PF & ESI) ACTS BEFORE CLAIMING AS DEDUC TION. THESE DUE DATES ARE 15TH DAY OF THE FOLLOWING MONTH WITH A GRACE PERIOD OF 5 DAYS. IN THE INSTANT CASE, SINCE THE ESI AND P F CONTRIBUTIONS OF THE EMPLOYEES (EMPLOYEE'S CONTRIBUTION) HAVE NOT BEEN PAID BY THE ASSESSEE BEFORE THE DUE DATES SPECIFIED IN THE RESPECTIVE (PF I.T.A.NO.2547/14 :- 5 -: & ESI) ACTS I.E. THE 15TH DAY OF THE FOLLOWING MONT H WITH A GRACE PERIOD OF 5 DAYS, THE SAME IS NOT ELIGIBLE FOR DEDUCTION. THEREFORE THE ASSESSING OFFICER HAS RIGHTLY DISALLO WED THE EMPLOYEE'S CONTRIBUTION OF PF AND ESI, AMOUNTING TO RS.16,19,736/ AND RS.3,07,570/-, RESPECTIVELY. THE ACTION OF THE ASSESSING OFFICER IS JUSTIFIED AND CONFIRMED. THEREFORE, THE ASSESSEE IS IN APPEAL. 4. WE HAVE HEARD BOTH PARTIES AND PERUSED THE CASE FI LE. THE ASSESSEE HAS PLEADED BOTH THE AFORESAID GROUNDS AS RAISED IN THE LOWER APPELLATE PROCEEDINGS. IT DOES NOT PRESS FOR THE REOPENING ISSUE IN THE COURSE OF HEARING. THEREFORE, WE PROC EED TO DEAL WITH THE CASE ON MERITS ONLY. ADMITTED FACTUAL POSITION IS THAT THE ASSESSEE HAS NOT REMITTED THE AFORESAID EMPLOYEES CONTRIBUT ION TOWARDS PF AND ESI WITHIN THE DUE DATES PRESCRIBED UNDER THE RESPE CTIVE STATUTES. THERE IS ALSO NO ISSUE THAT IT HAS REMITTED THE SAM E IN THE RELEVANT PREVIOUS YEAR AND BEFORE FILING OF THE RETURN. WE FIND THAT A CO- ORDINATE BENCH OF THE 'TRIBUNAL' IN ASSESSEES OW N CASE I.T.A.NO.2048 & 2049/MDS/2014 FOR ASSESSMENT YEARS 2003-04 AND 20 04-05 IN ITS ORDER DATED 31.10.2014, HAS RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN CIT VS AMIL LTD, 321 ITR 508 AND HOL DS THAT SECTION 43B DISALLOWANCE CANNOT BE INVOKED IN IDENTICAL CIRCUMS TANCES. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS . THUS, WE FOLLOW THE I.T.A.NO.2547/14 :- 6 -: AFORESAID DECISION AND ACCEPT THE ASSESSEES CON TENTIONS ON MERITS. THE IMPUGNED DISALLOWANCE IS DELETED. 5. THE ASSESSEES APPEL IS ALLOWED ON MERITS. ORDER PRONOUNCED ON WEDNESDAY, THE 4 TH OF FEBRUARY, 2015, AT CHENNAI. SD/- SD/- ( . . ) (B.R. BASKARAN) / ACCOUNTANT MEMBER ( . . ) (S. S. GODARA) ! '# / JUDICIAL MEMBER $! / CHENNAI %' / DATED: 4 TH FEBRUARY, 2015 RD '&'' ()'*) / COPY TO: ' 1 . / APPELLANT 4. ' + / CIT 2. / RESPONDENT 5. ),-' . / DR 3. ' +'/0 / CIT(A) 6. -1'2 / GF